What a joke. This is the WSJ editors trying to scare regular people into voting against their interests and in favor of the wealthy, who make the majority of income from Sub-S corporations, where their "salary" is in fact a "dividend," taxed at a 15% rate. What will happen to all of the stocks that don't pay a dividend. Will they rise by 30%? Besides, stocks are traditionally valued by something called a "multiple" that is calculated based on the market's perception of "forward earnings." There's no reason for this editorial, which is patently false and scaremongering, to be regurgitated in these pages.

4:21 pm May 7, 2012

Anonymous wrote :

It's almost certain Luskin's comapny is such a corporation. He's afraid of losing his special 15% tax rate on his income and having to pay federal income taxes like the saps working at McDonald's who aren't smart enough to hire accountants and lawyers to get them to self-incorporate so they can pay themselves in "dividends" taxed at 15%. Also, the last time I checked, taxes have never stopped anyone, companies included, from wanting to make more money. In the meantime, I'm going to fine-tune my imaginary stock/dividend tax rate valuation model to see where the value is out there. Pure insanity, wealthy trying to dupe the ordinary stiffs.

4:31 pm May 7, 2012

Anonymous wrote :

I'm a 1%er, retired and proud of the success I achieved by very hard work.
I make $500K/year from investments. Almost all of my income is from dividends.
I spend everything I make, every year. Aside from the approx. $140K in taxes I pay, the balance goes back into the private sector economy.
I can assure you that if my taxes increase substantially (and that word doesn't even begin to properly characterize the rise in taxes to 43.5% Fed + State), something will have to change in my spending as I do not intend to deplete my capital to support my lifestyle. Regardless of the effect on stock prices, my substantially reduced income will mean selling the vacation home and reducing the amount I spend on gardeners, housekeepers, Club memberships, vacations, entertainment etc. You take another $100K or so in taxes from me, I spend $100K less. The math is very simple.
A lot of 99%ers will be affected when I cut back.
That is what you need to be concerned about
End of story.

5:00 pm May 7, 2012

Bill wrote :

The two previous comments to this article referred to it as scaremongering. It isn't, but it is a bit overdone, and pretends the WSJ/MarketBeat is more important that it is. Most people that worry about this sort of thing been already been worried about it. When capital gains taxes and dividend taxes were reduced, it absolutely effected the mini market. One definitely need to look at after tax returns for taxable accounts, but taxable accounts are not the entire market. Likewise, thanks to the federal reserve, the options of moving money out of stocks into something with competitive after tax yield are sort of limited right now. That doesn't mean that money is it moving or going to move out of stocks. If it does happen expect it take months, and not been noticed as a reason by the market. Everybody that is going to rebalanced based on this has to evaluate the chance of this problem not getting fixed based of the political situation (I put it at 50-50) and then figure out how much less risk they are going to take based on the lower reward. It won't drop the market 30%, but it might cause it to go down 10-15 % ( or rise less) then it would have otherwise. I know this sounds like 8 million jobs that weren't lost, or sea level rising by 21 feet, but we never really get side by side experiments in economics.

6:32 pm May 7, 2012

Wait, What? wrote :

"we haven’t seen much of a drop-off in investor interest in dividend payers, or stocks generally" Apparently, Jonathan, you haven't been paying attention to volume in these markets. average volume is at 5 year lows.

5:26 pm May 8, 2012

John wrote :

Did we forget about 401k plans, pension plans, IRAs, Corporations, people in lower tax brackets. All own dividend stocks and will be unaffected by a dividend tax increase.

2:13 pm May 9, 2012

Hank in PA wrote :

The original editorial was ludicrous. The value of equities has not been tied closely to the level of tax rates in the past. The Bush tax cuts did not have a noticeable positive impact on the price of stocks.

People invest for the after tax return over time. It may be from dividends, it may be from appreciation and it may be from both. But if tax rates increase on one asset class that doesn't mean that people will decide to leave that class in any significant manner. There isn't another comparable asset with the same risk/reward profile.

2:28 pm November 6, 2012

John D. wrote :

Quoting the article: "So on Jan. 1, an investor won’t keep $8.50 of that dividend—he’ll pay a 43.4% tax and keep only $5.66. Suddenly, a stock that yielded him 8.5% now yields only 5.66%."

Um, no. This hypothetical ONE investor will pay that much IF AND ONLY IF he/she is in the top tax bracket and owns the stock in a taxable account. The same twisted logic occurs in every WSJ article or blog post about having the qualified dividend tax rate return to the rate on ordinary income. C'mon, WSJ, your credibility is out the window when you engage in this kind of bovine scatology.

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